Credit Constraints and Investment in Mexico, an Empirical Test

Abstract

Despite the vast overhaul the Mexican economy has gone through since the 1980s, the promised high and sustained economic growth has not materialized. Scholars and policy makers are unanimous in pointing to credit constraints as one of the key reasons for the disappointing growth performance. The link between financial restrictions and investment decisions, however, has not been solidly verified in the Mexican literature. This paper intends to start filling this lacuna. Using recent microeconomic, firm-level data which is reasonably nationally representative, it tests the hypothesis that credit constraints have reduced investment among Mexican firms. Consistent with the general thrust of the literature, it is found that indeed financial restrictions have reduced the investment carried out by Mexican firms. The result holds under different econometric estimations.

Global value chains, financial constraints, and innovation

“…It is considered as valid instrument because it represents an unexpected and exogenous shock to firms' cash flows and internal funds. Thus, it directly affects firm's cash flow and financial situation, but it does not directly affect its innovation (Ayalew & Xianzhi, 2019;Gómez-Ramírez, 2019;Gorodnichenko & Schnitzer's, 2013). By testing for the validity of the instruments, the two instruments are exogenous and over-identified for the two definitions of financial constraints-the factual-based and the perception-based-as shown in Table 11 in Appendix.…”

Expansionary Policy in Pandemics, a Dynamic Model Examination

“…We also suppose that > 0 and > 0, which means equation (2) expresses output rate of change is inversely related to the Covid-19 level and positively related to its own level. 8 For the former, it could be simply pointed out that when people get sick or die of Covid-19, they cannot contribute to output and often require others' care. 9 The latter is a standard assumption in short-run Keynesian economics, and long-run neoclassical economics endorses it too.…”

Credit constraints and structure: a theoretical model of extractivism and slow-growth dynamics

“…This paper belongs in the literature where economic dualism is dynamically modelled in relationship to trade and accumulation (Ros, 2013b). Our most immediate references are Skott andGómez-Ramírez (2018), andGómez-Ramírez (2019), who examine credit constraints and growth in Mexico. We however offer an extended model, the case of an economy which also exhibits a third, "extractive" sector.…”